Crude palm oil futures on Malaysia’s derivatives exchange fell Monday as investors took profits on a recent rise in prices.
The ringgit's rise against the dollar Monday also weighed on palm prices, as its strength makes CPO more expensive, affecting margins at palm refining firms, trade participants said. The dollar fell to MYR3.2550, from MYR3.2950 on Thursday. Malaysian markets were closed for a public holiday on Friday.
The benchmark August contract on the Bursa Malaysia Derivatives ended MYR21 lower at MYR2,436 a metric ton after falling to an intraday low of MYR2,425/ton, the lowest level in nearly two weeks.
Palm oil prices have fallen 4.8% in May amid concerns that the euro zone's debt fears could spread, and "a bearish supply outlook hasn't helped either," said a senior trading executive in Kuala Lumpur.
Higher palm export estimates in May weren't sufficient to spark much buying, as the market focused instead on supply fundamentals and the currency, trade participants said.
Cargo surveyor Intertek Agri Services estimated May palm oil exports at 1.33 million tons, up 13% from April. Another surveyor, SGS (Malaysia) Bhd. put the figure at 1.32 million tons, up 8.6%.
"Market sentiment isn't positive at all as many are expecting higher CPO production to continue into June, raising concern about a possible spike in inventories," said senior trading executive at Kuala Lumpur-based brokerage OSK Futures.
Trade participants said May CPO output likely rose 6%-10% on month.
"There's also concern whether demand will be higher in coming months given the current price dynamics between palm olein and soyoil," said a Singapore-based trading executive.
Palm prices have traditionally traded at a wide discount to rival soyoil. However, prospects of a marginal rise in CPO output have boosted palm prices even as soyoil prices declined on an expected record soybean crop in South America, making soyoil the cheaper vegetable oil for now.
"If demand doesn't rise fast enough, we'll see a scenario where palm inventories will rise very quickly in next few months," the executive said.
In the cash market, palm olein for October/November/December was traded at $777.50/ton free-on-board Malaysian ports, said a Singapore-based cash broker.
Meanwhile, no trades were reported on CME's Group Inc.'s (CME) dollar-based CPO futures for September contract due to a holiday in U.S. The benchmark August rupiah-denominated CPO futures on the Indonesia Commodity and Derivative Exchange ended 0.7% lower at IDR6,715 a kilogram, with 97 lots traded. One lot is equivalent to 10 tons. The September contract ended 0.2% lower at IDR6,680/kg, with 90 lots done.
Open interest on the BMD was 70,020 lots, versus 70,974 lots Thursday. One lot is equivalent to 25 tons.
A total of 9,540 lots of CPO were traded versus 9,667 lots Thursday.
Closing BMD Crude Palm Oil (CPO) futures prices in MYR/ton at 1000 GMT: Month Close Previous Change High Low Jun'10 2,499 2,519 Down 20 2,517 2,499 Jul'10 2,478 2,500 Down 22 2,494 2,469 Aug'10 2,436 2,457 Down 21 2,457 2,425 Sep'10 2,401 2,429 Down 28 2,430 2,397
-By Shie-Lynn Lim, Dow Jones Newswires; +603 2026 1233; shie-lynn.lim@dowjones.com
(END) Dow Jones Newswires
May 31, 2010 06:52 ET (10:52 GMT)
Copyright (c) 2010 Dow Jones & Company, Inc.
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